Tesla plans to keep more stores open, re-increase prices, backtracking on previous plan

Is Tesla operating by a plan, or by whim? A couple weeks ago Tesla announced they would be closing most of the stores, and convert many stores to be “galleries” in a move that would supposedly decrease costs and therefore allow Tesla the profit margin required to start selling the $35,000 MSRP Tesla Model 3. This month we’re told a different plan, a change-up in which stores will close, and increased car prices in some models.

That’s enough to make one scratch their head in WTF mode.

Tesla’s previous store-closing-plan-to-start-selling-affordable-Model-3

The previous plan is only 2 weeks or so old was this

To achieve these prices while remaining financially sustainable, Tesla is shifting sales worldwide to online only. You can now buy a Tesla in North America via your phone in about 1 minute, and that capability will soon be extended worldwide. We are also making it much easier to try out and return a Tesla, so that a test drive prior to purchase isn’t needed. You can now return a car within 7 days or 1,000 miles for a full refund. Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free. With the highest consumer satisfaction score of any car on the road, we are confident you will want to keep your Model 3.
Tesla

Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6% on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected. Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers. The important thing for customers in the United States to understand is that, with online sales, anyone in any state can quickly and easily buy a Tesla.

Okay – Tesla’s online “design studio” is pretty good about showing the options and whatnot. Someone could in theory design and order a car without the help of a sales assistant. And according to Tesla this move would save some money, that would improve profit margin, allowing them to start selling the $35,000 MSRP Tesla Model 3.

Many of us balked at the idea since for a large purchase we want to touch the thing rather than buy sight-unseen. Further this seemed like a ploy to help Tesla out of a tight corner, since there are bond repayments to make.

Tesla’s new store-closing-plan-to-start-selling-affordable-Model-3

Out with the old plan, in with the new plan, long live the new plan? Cue someone in the background calling out “I for one love this new plan”.

Tesla says that management evaluated every sales location, and then decided to keep more sales locations open than previously planned. Tesla had already closed a few sales locations, claiming those were ones lacking the kind of foot traffic required by the kind of locations Tesla builds, and that those locations would have been closed irregardless of any other plan.

As it stands 20% of the locations are under review and will be closed unless results improve at those stores.

Finally, because the new plan is to keep more stores open, prices will have to increase by 3%. The affordable $35,000 MSRP Model 3 will remain at that price. It is the other vehicles which will see price increases.

Is this the way to run a big business?

In case it wasn’t already abundantly clear, this new announcement crystalizes the conclusion that Tesla did not perform due diligence before announcing the store-closing plan.

Normally decisions like reviewing underperforming stores is done not in the public, but in management meetings. Normally employees do not learn they’re being laid off by hearing about it on the news. Normally investors will be consulted on large policy changes like this. Normally car companies offer stable pricing. Normally car companies offer test drives – because buying a car is a big deal that takes awhile to close the sale.

Every item in the previous paragraph are in current news reporting about Tesla and its new sales plan.

This does not look good for Tesla and it’s the week when the Tesla Model Y will be announced.

By the way, Tesla’s product naming is another example where we have to question whether Tesla’s management is serious, or whether Elon Musk is just a geek playing geek games with billions of dollars in assets. The model names so far are Model S, Model X, Model 3, and the new Model Y. Tesla chose ‘Model 3’ after Ford prevented Tesla from using ‘Model E’ – after which Tesla CEO Elon Musk complained about Ford being against SEX.

Hence, the model names are spelling out the word “SEXY”.

And we’re expected to take Tesla seriously?

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About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.